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This information applies to England, Wales, Scotland and Northern Ireland
Starting a new job
When you start a new job your employer needs to know your tax code. If you have a form called a P45 from a previous job in the same tax year, your employer will use the information on this to deduct the right amount of tax. If you were unemployed and receiving jobseeker’s allowance, you should give your new employer the P45U you were given by the Employment Service jobcentre.
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No P45 or P45U
You may not have a P45 or P45U. This may be because you:-
- are starting your first job - see above; or
- were unemployed but not receiving jobseeker’s allowance and therefore do not have a P45U - see under heading Unemployment, short time working or on strike ; or
- have lost the P45 or P45U - see below; or
- were not given a P45 by your last employer - see below
If you cannot give the employer a P45 or a P45U, your employer will give you a P46 form which, when completed, allows your employer to deduct tax on an emergency code until the right amount of tax to be deducted is worked out.
For more information about being taxed on an emergency code, see under heading Emergency tax codes in The Pay As You Earn – PAYE – system.
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Lost P45 or P45U
If you have lost your P45 or P45U, you will not be able to obtain a duplicate, as these are never issued. Your new employer, or the job centre if you are claiming benefit, will ask you to complete a P46.
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Fringe benefits (benefits in kind)
Fringe benefits are any benefits which you receive from your employment which are not actually included in your salary cheque or wages. On the tax return form they are called benefits in kind. They include such things as company cars, private medical insurance and cheap or free loans. Not all fringe benefits are taxable and some are only taxable if you are earning over a certain limit.
If you receive any taxable fringe benefits, you must list them and their value on your return for the relevant tax year, whether or not tax has already been paid on the benefits under PAYE. Your employer also has to make a return to the tax office giving details of any fringe benefits given to you.
For more information about fringe benefits, see Fringe benefits.
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More than one job
If you have more than one job, you will get a separate PAYE code for each job in which your earnings are taxed under PAYE, and normally a separate notice of coding for each job. All the reliefs and allowances you are entitled to will normally be included in the tax code for your main job. This means that all your earnings from the second job may be taxed. If so, the tax code you are given for the second job will be:-
BR: if you are being taxed at the basic rate of tax; or
DO: if you are being taxed at a higher rate of tax.
If the income earned from the second job takes you into the higher rate of tax, all the earnings from the second job will be taxed at the higher rate. If you are in this situation you may find that your tax bill will need adjusting at the end of the tax year.
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Other taxable income
If you have other taxable income in addition to wages or an occupational pension, the tax due on this can be deducted from these payments by your employer. This is done by altering the amounts of the allowances given to you, in effect reducing the amount of income you can receive before you have to pay tax. The most common forms of other income which are taxed in this way are state retirement and widow’s pensions.
For more information about how other taxable income can be taxed under PAYE, see Income tax for people aged 65 or over.
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Wage rises
When you get a wage rise you are liable to pay more tax and the adjustments for this will be done automatically by your employer.
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Changes to income tax in the Budget
Changes to income tax are usually made by the government in the annual Budget, for example, the amount of the allowances are usually increased. The changes are announced during November and take effect from the following 6 April.
If the allowances go up in the Budget, this increases the amount of tax-free pay you can receive before you start paying tax. If your tax code includes the letters L, P or V, your employer can make the adjustments automatically. This will usually be done in January so that the new allowances can be implemented on 6 April.
If your PAYE tax code includes the letter T or K the tax office has to send a new code to you and your employer before the adjustments can be made. The adjustments should be in place by 6 April, but if there is any delay you will receive a tax refund.
For an explanation of tax codes, see under heading How is PAYE calculated in The Pay As You Earn – PAYE – system.
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Change in circumstances
Your tax code will be affected if:-
- your personal circumstances change, for example, you turn 65 and you become entitled to different, age-related allowances; or
- your outgoings change and you can claim extra reliefs, for example, through the rent-a-room scheme; or
- your taxable income changes, for example, you start receiving a taxable pension. This other income can also be deducted from your wages through PAYE.
For more information about the rent-a-room scheme, see Tax reliefs (excluding self-employed people).
If your tax position changes, your tax code may need amending. You should write to the tax office with full details of the changes and asking for the code to be amended. You should give your full name and national insurance number and details of your employer’s name, address and tax reference number. You can obtain these details from your P60 or by asking your employer. You should enclose your last notice of coding if you have one.
It is important to write as soon as possible because you may be paying the wrong amount of tax because your tax code is incorrect. This could result in either an overpayment or an underpayment of tax. If an underpayment arises the tax office will collect this and has the power to charge interest or impose a fine.
If the tax office needs further details before they can change the code they will sometimes send a tax return for completion. This should be returned within 30 days. If there is any delay in its return, this will result in change to the tax code being delayed.
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Sick or on maternity leave
If you are sick or on maternity leave you will have the tax on your pay collected under PAYE.
If you do not receive any pay you will be entitled to a rebate. This is because you did not use your tax allowance during the period when you were unpaid.
The rebate can either be paid when you return to work or while you are off work. If you are not getting any pay, you might prefer to have the rebate as soon as possible rather than wait until you are next paid. You should ask your employer to arrange this or confirm when the rebate will be paid.
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Unemployment, short-time working or on strike
If you are unemployed, on short-time working or on strike you may be entitled to a rebate of tax at the end of the tax year. This is because the amount of tax you have paid may be too high for the amount of earnings you are now likely to receive over the tax year. However, if you get jobseeker’s allowance which may be taxed, the rebate may be cancelled out.
If you are temporarily on short-time working, your employer should make whatever tax rebate you are entitled to on your normal paydays.
If you are on strike or involved in a trade dispute you will not be able to claim a tax rebate whilst on strike. Instead, you will have to wait for a rebate under PAYE - in other words when you either leave the job or return to work. If you are still on strike at the end of the tax year, you will not get a rebate until you leave the job, or return to work. However, your employer will give you your P60 which will show the rebate which is due as if it had been paid. Your employer must also give you an additional note saying how much tax rebate under PAYE is being withheld until you leave or return to work.
For more information on tax rebates, see Tax rebates.
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The employer or tax office makes a mistake
Your employer or tax office may make a mistake, for example, the tax office gives your employer the wrong PAYE code or your employer wrongly calculates your tax and deducts too much or too little tax. In these circumstances the amount of tax which you have over or underpaid will be rebated or reclaimed by adjusting your PAYE tax code for the following tax year. In a limited number of circumstances you may not have to pay all the tax arrears that you owe.
If you think that a mistake has been made in the amount of income tax you have been paying, you should inform the tax office as soon as possible.
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Leaving a job
If you leave your job - either voluntarily, through dismissal, redundancy or because you retire, the employer should give you a Form P45. The P45 gives details of your employer's tax office, your employer’s tax reference number, your tax code and the total amount of pay and tax deducted during the current tax year. If tax has been deducted on the emergency code, the P45 will have an X in the box marked week 1 or month 1 and there will not be any details of pay or tax. You should keep the P45 in case you start work again.
If your employer fails to give you a P45 after being asked to do so, you should contact your tax office as they may encourage your employer to issue a P45. If your employer cannot be persuaded, a new employer will ask you to complete a P46 form which allows your new employer to deduct tax on an emergency code until the right amount of tax to be deducted is worked out.
If you claim jobseeker’s allowance, you will have to give the P45 to the Employment Service jobcentre. If you start work again before the end of the tax year, the jobcentre will give you a P45U which include details of the taxable benefit you have received as well as the normal P45 details.
If you leave at the very end of the tax year you should be given a P60 and a P45.
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Students
If you are a student who is working during vacations, you will usually pay tax in the same way as other employees. However, you and your employer can fill in a form P.38S which your employer can obtain from the tax office or local tax enquiry centre, which means tax will not be deducted under PAYE. The form must show that all the student’s earnings, plus any other income for the tax year, will not exceed the total allowances and reliefs that you can claim.
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Dealing with a tax problem
If you have a problem about your income tax, you may be able to resolve it by talking to your employer. Your employer will have guidance from the office on how to operate the PAYE tax system and deal with problems.
If the problem cannot be resolved by talking to your employer, you can contact:-
- a tax enquiry centre
- the tax office which holds your records.
For details of tax enquiry centres and tax offices, see under heading Dealing with a tax problem in Help with tax problems.
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